Inside Asian Gaming

inside asian gaming June 2014 24 Feature able to find its gaming revenue legs at a time when the recession was dampening spend up and down the Strip, and the bank has never made a secret of its desire to unload it. The deal represents the first significant casino investment by Blackstone, a multinational private equity group whose $81 billion in property assets includes apartment complexes, office buildings (the massive Hughes Center in Las Vegas is one of them) and shopping centers. The group also holds a small stake in Las Vegas-based Caesars Entertainment. “As a significant investor in the hospitality sector Blackstone recognizes the value and potential in the Cosmopolitan and Las Vegas and looks forward to working to build on the success to date,” Tyler Henritze, a senior managing director, said in a statement. Union Gaming says the next step will be finding the right operator. “We wouldn’t expect a financial buyer to manage the property,” the firm said. “A potential operator that has a large player data base, experience with high-end Asian play and managing high- end properties would be immediately accretive to the property’s performance.” Occupying 8.7 acres at the heart of the Strip between Bellagio and CityCenter, the Cosmopolitan was conceived by Mr Eichner as a luxury residential complex. Deutsche Bank scrapped that idea and converted its two 52-story towers into a hotel and added a 110,000-square-foot casino, 300,000 square feet of restaurant and retail space, an 1,800- seat theater, a 40,000-square-foot spa and fitness facility and 150,000 square feet of meeting and convention space. Best-known for its restaurant and nightclub offerings—Rose. Rabbit. Lie and a branch of New York City’s Marquee, one of the top- grossing clubs in the US—the property has struggled overall. Last year’s average daily room rate of $275 was a premium to other high-end properties in the market—Wynn/Encore reported $258, Venetian/Palazzo $205—but the year ended in a net loss of $94.8 million on total net revenue of $652.5 million. But that was an improvement over 2012, when the property lost $106.6 million on revenues of $595.2 million. Challenges on the gaming side have continued into 2014. First- quarter F&B revenue of $85.4 million was 42% higher than casino revenue; and while total revenues were up 14.6% year on year, the three months ended in a net loss of $12.7 million. Collectively, these two regions generated 49.1% of the tribal gaming industry’s revenue. However, now more than ever, tribal gaming is feeling the impact of the expansion of commercial gaming. Since 2008, noted Mr Loeschner, tribes in Connecticut, Kansas, New York, New Mexico and Oklahoma have seen negative effects of commercial gaming operations. Additionally, expansion within the tribal gaming industry itself has increased as well, notably as 20 new casinos have opened over the past five years. Mr Loeschner noted the tribal gaming industry will focus on four things in the coming year: federal recognition and the push for Congress to enact meaningful legislation providing tribes protection from infringement on their sovereignty; state gaming compact negotiations in New Mexico and Michigan, which will likely establish a precedent for the future; Internet gaming and the prospect of more states legalizing it; and NIGC compliance with recently issued regulations for Class II gaming. “Overall, the US gaming industry will continue to grow through the emergence of new markets, such as Massachusetts and New York,” said Mr Holmes. “However, this growth will be offset by continued declines in existing markets which continue to experience year-over-year revenue declines.” Reprinted with permission from Casino Journal . To read this report in its entirety, visit www.rubinbrown.com . The Las Vegas Strip has transformed itself from a gambling town into an entertainment and vacation destination. Marquee at the Cosmopolitan is one of the top-grossing nightclubs in the US.